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Imperial Tobacco to Close Ontario Plants, Moves Work to Mexico, Cuts 650 Jobs

Posted on: Thursday, 20 October 2005, 18:00 CDT

By ALLAN SWIFT

MONTREAL (CP) - Imperial Tobacco Canada is closing its manufacturing plants in southwestern Ontario - cutting 650 jobs - as the Montreal company moves cigarette production to Mexico.

Canada's largest cigarette producer said late Thursday it will shut down its plants in Guelph and Aylmer, Ont. over the next two years, and move the work to Monterrey, Mexico, where its British parent will expand local operations.

About 635 jobs will be lost in southwestern Ontario while about 15 will be eliminated at the company's headquarters in Montreal from the restructuring.

The move is a devastating blow for the Canadian tobacco growing industry in southwestern Ontario, where farmers face rising debts, bankruptcies and a bleak future.

In the 1960s, there were more than 4,500 tobacco farms throughout Canada. That number fell to about 1,650 growers a decade ago and only 680 today. Virtually all of them work on a small stretch of land north of Lake Erie known for its natural irrigation and fertile soils that provide Canadian tobacco with a distinct flavour.

Imperial, which shut down its Montreal tobacco making plant two years ago, said Thursday it decided to close its Ontario plants after carefully considering its ongoing sales decrease in Canada.

For example, the company noted that tobacco sales fell to 20.5 billion cigarettes this year from about 32.7 billion in 1994.

The company owns Canada's largest tobacco manufacturing plant which was built in Guelph in 1959, at a time when cigarette sales were much higher.

"The yearly decline in tobacco sales is affecting the company's manufacturing, and its unit costs have escalated to a level where the company can no longer ignore the situation," Imperial Tobacco Canada said in a release.

"After examining all the various options and scenarios available to deal with this issue, the company believes that this move is the best solution and essential to secure the company's leadership position in the long-term."

Imperial, which is owned by global cigarette giant British American Tobacco, said it will continue to maintain a strong presence in Canada, where it recently announced an $11 million investment for a new research and development centre besides its Montreal head office.

As well, the company will also keep its regional sales offices across Canada.

However, it will take special charges of about $525 million on its books over the next three years, including non-cash charges to write off the value of plants and equipment.

In breaking down the streamlining moves, Imperial Tobacco said it will:

-Close the Guelph cigarette plant in 2006, cutting 555 jobs;

-Shut down the Aylmer fine-cut tobacco operation and processing plant in 2007, affecting 80 positions.

-Cut 15 positions in the Montreal head office depending on the final impact of the plant closures.

"Taste and quality will remain the same for all of the company's products, only the assembly location of their components will changem," Imperial added.

"The company will maintain most of its current manufacturing suppliers and it will continue to purchase Canadian tobacco to use in its cigarettes. It will also continue to negotiate with the Ontario Flue-Cured Tobacco Growers' Marketing Board for future purchases of Canadian-grown tobacco, and will continue to work with the board to find solutions to maintain a viable Canadian tobacco-growing industry."

Source: Canadian Press

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